Keeping What’s Yours

Mike Jones, a broker with Crump Insurance Services Inc. of Altamonte Springs, offers a few annual premium cost and coverage examples: CGL for a large nationwide bus company 2/2/2 limits, $48,500 per year; condo association 1/2/2, limits $4,200; convenience store 1/1/1 limits, $2,276; and commercial construction account 1/2/2 limits, $12,500. A CGL policy typically provides $1 million in coverage per occurrence subject to a $2 million aggregate.

A basic CGL policy covers four categories of issues for which a business owner could be held responsible: bodily injury; damage to others' property; personal injury, including slander and libel; and false or misleading advertising.

Protection From Lawsuits
"With attorneys advertising on phone books and TV, everyone has access to an attorney 24 hours a day. And when their neighbors say, 'I'm not suing you for anything, it's the big insurance company who would pay,' some folks forget that their premiums and even policies are at risk," Generale adds. "We also tend to see claims go up when the economy is tight as folks have less disposable income to cover a loss." Lynne McChristian of the Insurance Information Institute echoed Generale's concerns regarding the possible legal issues.

"Potential risks can increase as a business grows, so it is very important that business owners stay in touch with their agent on a regular basis to ensure that their insurance coverage is right for their specific risks," McChristian says. "It also is a good idea for a business owner to stay aware of legal issues that can affect the risks of operating their business."

"A CGL policy does more than just indemnify the insured for a judgment entered at the end of a long court case," explains Joseph Mathieu, assistant vice president of middle market commercial general liability and umbrella underwriting for The Hartford. "For a covered claim, the policy also provides the insured with a legal defense once a lawsuit has been filed. In today's environment, the costs associated with defending a lawsuit can be quite sizable and can pose a financial risk to a business in its own right."

For most businesses, a policy with $1 million to $2 million in coverage will be adequate, adds Tammy Gleason, commercial lines manager with Generale's agency. "We tend to see mostly slip-and-fall cases, the uninsured handyman who is injured on the premises, and dog bites," Gleason says. "However, being prepared for any potential risk is critical for a business owner."

Who's Writing
Major brands like State Farm, Allstate, Nationwide, and Farmers are not currently big players in Florida's CGL market.

"We don't generally offer CGL separately," says Michael Grimes, a Florida spokesman for State Farm. "It usually is part of a package with property insurance; and we are not actually writing it at this time in Florida." Grimes suggests that a surplus lines carrier would more likely offer the coverage.

Allstate spokesman Justin Herndon had a similar message. "We aren't writing much" in the CGL area, he says.

Although general liability coverage is routinely provided in the standard insurance markets, businesses with higher risk profiles might need to go to non-standard markets to obtain coverage. This is where a surplus lines broker like Crump can help.

"Excess and surplus lines brokers play an important role in the market place by helping find insurance for the more difficult risks and classes of business," says Jones, the broker with Crump. "When the overall insurance market becomes restrictive (hard), the need for a broker is increased. And when the marketplace becomes less restrictive (soft), brokers have a diminished role in the marketplace." "We work primarily with retail independent agents and offer policies with both admitted and non-admitted carriers," says Pamela Falcione, a broker/underwriter with Bass Underwriters of St. Petersburg. "The agents either have a client that doesn't fit their standard markets or they don't have access to those markets."

What's Covered, What's Not
Knowing what the CGL policy covers is important, but so, too, is knowing what is excluded from its coverage.

Laura Warren, president of the State Insurance Group, an independent agency with locations across Florida, points out that business owners need to thoroughly understand their policies, especially the risks that are not covered.

"The basic CGL policy does not cover such things as bodily injury or property damage that is expected or occurs as a result of willful acts of the insured," Warren explains. "CGL also does not cover assumption of liability in a contract; injury to an employee; damage from release of pollutants; damage or injury arising out of business use of an auto, aircraft, or watercraft; or damage as a result of war or as a result of professional services or treatments."

Other key issues not covered under a CGL policy include:

• Employee-related claims such as sexual harassment, wrongful termination, failure to give a promotion or to offer employment to a candidate, or race and gender lawsuits. For those events, a business owner would need to purchase employment practices liability coverage.
• Work-related injury claims. A workers' compensation policy protects a business owner from claims by employees who are injured or become ill while performing their job duties.
• Claims for wrongful practices by professional service providers, including health care providers, lawyers, and consultants. Professional liability insurance or errors and omissions insurance covers service errors or failure to provide a service altogether.

"It is important for agents and brokers to have a clear understanding of the full scope of their clients' exposures so that they can provide appropriate guidance based on their clients' specific needs," Mathieu adds. 

Consumer Education
The National Association of Insurance Commissioners (NAIC) has put together an online educational program to help consumers better understand all the various areas of insurance. The program is called Insure U and it features, among other things, a special business section—Insure U for Small Business—along with helpful explanations of various components of the insurance policy and tips on how to prepare for selecting an insurance coverage that best meets the individual business owner's needs. "The Insure U program provides an unbiased source of insurance information utilized not just by the NAIC, but also by the state insurance departments to augment their grassroots campaigns," says NAIC Communications Director Scott Holeman. "For consumers and small business owners, education is the most important tool they can have when it comes to their insurance decisions. Understanding their options will help them participate fully in the insurance decision-making process."

For example, the NAIC recommends that before meeting with an agent, broker, or customer service representative to either purchase or review a policy, consumers and small business owners should familiarize themselves with the line or lines of insurance they are evaluating. They should  make sure they understand the terminology that may be used in the discussion and prepare any questions they have about the coverages or terms. (Insure U's section on CGL discusses the coverage in detail, using language the average consumer will understand.)

Holeman also points out that Insure U can help insurance consumers better understand how their potential risks might be evaluated and priced by an insurance company. Insure U materials explain that insurance companies evaluate a business's risk for liability coverage based on numerous factors: the number of claims filed within an industry or the probability of a claim for a similar type of company; the financial stability and longevity of a business; state laws; business products and/or operation; and the approach used by a business for handling and preventing potential risks.

"If an owner has solid, documented practices and safety procedures in place, he may be considered a lower risk by an insurance company for liability insurance, and therefore be charged lower premiums," Holeman says.

The Florida Office of Insurance Regulation website features a handy section that enables consumers to search for a listing of companies authorized to do business in the state. Although not a guarantee that a company will offer coverage to a specific consumer, anyone interested in looking for a company can search by going to the "Industry Data" tab on the home page, and then selecting "Active Company Search" from the drop-down. Then, under the "authorized lines of business" category, entering the term "commercial multi-peril" will yield a helpful starting point of company names. 

"As with other insurance products, it's important to look beyond price in purchasing commercial general liability coverage," The Hartford's Mathieu says. "A carrier's reputation, financial strength, loss control and claims services are all critical factors to consider. Commercial general liability insurance is a must-have for business owners looking to protect their business and personal assets from lawsuits that can be ruinous to their business."